Judge Cannot Deny Petition to Establish (d)(4)(A) Trust Due to Public Policy Concerns

The Supreme Court of Arkansas rules that a judge cannot refuse to establish a (d)(4)(A) trust because of public policy concerns if the petitioner otherwise meets the statutory requirements set out in state and federal law. In The Matter of James S. Corn (Ark., No. CV 15-902, June 2, 2016).

James Corn’s partner passed away having created a third-party special needs trust to hold Mr. Corn’s inheritance. Unfortunately, Mr. Corn’s was also named as the direct beneficiary of approximately $260,000 in life insurance benefits and transfer on death bank accounts that were never directed towards the special needs trust. Because Mr. Corn received Supplemental Security Income (SSI) and Medicaid, he petitioned the court to establish a (d)(4)(A) trust to hold the benefits he was bound to receive.

At the hearing to establish the trust, the judge asked Mr. Corn to provide her with a list of the assets that were passing to the third-party trust, saying that “I’m starting to have a public policy issue with [special needs trusts] because people out here who are making $30,000 a year and paying taxes, their tax money is going to help provide these benefits . . . ” When Mr. Corn did not provide the requested information at the hearing, despite having laid out in detail how he met the statutory requirements in order to qualify as a beneficiary of a (d)(4)(A) trust, the judge rejected his petition on public policy grounds and because he had not provided enough evidence that he was disabled. Mr. Corn appealed.

The Supreme Court of Arkansas reverses the trial court and remands the case for further action. The court finds that “D4A trusts are clearly provided for by 42 U.S.C. § 1396p(d)(4)(A), and although a state’s participation in the federal Medicaid program is voluntary, states that choose to participate must comply with the requirements of the federal Medicaid statute. . . Furthermore, we see no logical reason why a disabled person cannot be the grantor and petition the court to establish the trust so long as the requirements of 42 U.S.C. § 1396p(d)(4)(A) have been met.”